Zoe Elena Horn examines the impact of the global economic crisis on women in the informal economy.

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Perhaps the most enduring legacy of the global economic crisis is the intractable employment crisis gripping the world’s workforce. Unemployment is at record highs in many of the world’s richest countries, but it is underemployment that threatens the world’s poorest and most vulnerable workers. With little access to formal employment opportunities – before or after the crisis – most income earning opportunities for those in the developing world are found in the informal economy. This employment is largely low wage and high risk, with scant legal or social protection. A rise in underemployment signals a rise in those working but not earning enough to escape poverty, and while another round of bailouts to the world’s richest economies seems imminent, the pressure at the bottom of the global economic pyramid is growing.

Photo: Self Employed Women’s Association (SEWA)

Women tend to be dramatically over-represented in the informal workforce. In India, for example, informal employment accounts for nine out of every 10 women working outside agriculture. And there is a significant overlap between being a woman, working in the informal economy, and being poor. Compared to their male counterparts, women are more likely to be self-employed and sub-contracted workers, and less likely to be employers or paid employees of informal enterprises. Many are also breadwinners or contribute very high proportions of the household budget, putting informally employed women at the head of many of the world’s most economically and socially vulnerable households.

Good times and bad

Though few dispute its ranks are swelling, the informal workforce has received little attention throughout economic crisis discussions – either as a point of interest for investigation or intervention. It is commonly assumed that the informal economy is flexible enough to adapt to economic shocks while simultaneously providing a refuge for retrenched formal workers. This is simply not the case. In a global economy where formal and informal economies are dynamically linked, informal workers cannot be immune from the impact of the crisis. Demand sensitivities, price fluctuations, and the dynamics of competition shape the informal economy in good times and in bad.

In late 2008, the partners of the Inclusive Cities project, with overall guidance and co-ordination by the global network, Women in Informal Employment: Globalizing and Organizing (WIEGO), set out to address the gap in information about the impact of the crisis on informal workers, particularly women. Researchers conducted individual and focus group interviews in 14 urban locales across Africa, Asia and Latin America, and in three segments of the informal economy: home-based work, street trade, and waste collection.

First-round evidence, from early 2009, suggested that participants were affected by the crisis in much the same way as their formal counterparts. Self-employed workers suffered directly and indirectly from shrinking consumption and declining demand in local markets. Cash-strapped patrons forced street vendors and home-based producers to lower prices, in spite of rising work inputs. Waste pickers faced plummeting prices for their collected materials due to depressed global demand for recyclables. Wageworkers faced decreased work orders for products bound for overseas. Compounding the problem, informal workers faced increased competition from new entrants to the workforce, and had no social or economic safety nets to fall back on.

Grim picture

A year later, respondents reported a similarly grim picture – a few positive developments, but a general lag in recovery in wages and working conditions. Persistent unemployment and underemployment pushed more workers into informal employment, and many respondents continued to work longer hours for less pay. While 77% of 2009 respondents reported that their incomes had fallen between early and mid-2009, 55% reported that their incomes had fallen further between mid-2009 and mid-2010. Some respondents reported an increase, but none had seen their income return to pre-crisis levels and most rising incomes had not kept pace with increased costs of living.

Vulnerability – the probability that a shock will result in a decline in well-being – has increased for households dependent on income from informal work, exposing women and children in particular. Strongly driven to continue working for the well-being of their families, women are struggling harder to feed them, while still providing equal or greater levels of unpaid care and domestic chores. Many such working women commit the entirety of their incomes to household expenditures – an increasing burden as chronic unemployment and underemployment take a toll on other household earners. Despite devoting more and more time to paid work, women were less likely to be able to afford the few conveniences that could lighten their unpaid load, like prepared meals and childcare.

Many respondents faced fewer resources that were stretched even further as food and fuel prices have remained high since early 2008. Restricting both the quantity and quality of food, women were serving fewer meals, while “luxury” items like milk and meat were eliminated from many households. School-related costs were also difficult to meet. While withdrawals were uncommon in 2009, the strain had taken its toll and drop-outs were increasing by 2010. Women were anxious about the impacts of these measures on their children, highlighting the fact that the crisis has heightened the role of women as gatekeepers in the inter-generational transfer of poverty.

Response

It is essential that policymakers acknowledge the informal economy as a critical source of employment during good times as well as bad. With an extended forecast of economic uncertainly, and more and more of the world’s workforce turning to informal livelihoods, extending social and economic protection for these workers has never been more critical. Informal employment is still an enigma to many policymakers, which makes consultation with informal workers even more essential in the development of any crisis-response strategy. In 2009 and 2010, respondents in the Inclusive Cities study were asked to propose and rank a variety of possible crisis interventions. Unsurprisingly, workers denounced stopgap measures and prioritized greater recognition for their livelihood activities.

First and foremost, workers must be allowed to earn a living. Reducing the barriers to informal work – harassment, raids, barring access to waste – allows workers to continue to feed their families during desperate times. Wage protection and inclusion in minimum wage schemes are also critical to protect workers’ incomes, and small workplace investments – access to water and toilets at markets, safe waste-handling equipment, subsidized electricity for home-based workers – could have substantially magnified effects on earnings and well-being. Workers would also benefit greatly from programmes to improve financial literacy and access to financial services. With an eye to the future, respondents were eager for skills training and upgrading, and improved access to and knowledge of markets, such as inclusion in municipal waste collection schemes. Finally, the greatest investment should be made in the creation of targeted social protection measures for informal workers – such as specialized childcare and health services – to address the chronic insecurities in food, health, and education faced by these workers.

Informally employed women will play a particularly important role as agents of change. Women tend to be the least visible and most vulnerable in the informal economy, and yet are often the most powerful economic and social agents in their households and communities – their mobilization and leadership will be critical to improving the lives of many workers and their families across the developing world. For this reason, it is critical that greater gender-specific monitoring in the informal economy becomes a priority both for governments and for economic and international institutions in the future.